The SEC has brought an enforcement action against a small group of hackers who fed nonpublic information stolen from press release distribution companies and then passed the information to traders who profited through insider trading with the tips.
The hackers and traders stole information about the corporate releases of more than thirty companies. According to the complaint, they posed as employees and customers of the press release companies and then used proxy servers to mask their identities. The scheme allowed them to learn about upcoming earnings announcements early and then pass that information on to a network of traders in several different countries to trade on that information. The insider trading violations netted them more than $100 million in illegal profits over the five year period.
The press release suggests that the SEC used their analytical trade analysis tools in order to find the suspicious trading patterns rather than a whistleblower. However, this is the type of enforcement action that might have resulted from a SEC whistleblower tip. The program allows individuals to provide information about violations of the federal securities laws, including insider trading, to the government. An insider trading whistleblower, if there was one in this or another case, would stand to be awarded between 10 and 30 percent of the recovery if they were eligible for an award.
Cybersecurity has been a big area recently for the SEC as intrusions into public companies have allowed previously nonpublic information to be passed to traders who can take advantage of it in the stock market. In June, the SEC was reportedly looking for a hacking group known as FIN4 that was hacking into biotechnology and healthcare companies for inside information that they could use to profit on.